Tag Archives: Inflasjon

Hvordan redde verden? Visk opp litt inflasjon.

Inflation cartoon
Dette forslaget er ikke nytt, heller ikke argumentasjonen bak. Men historien kan fortelles overbevisende eller ikke. Her er en paragraf fra Manzie Chinn og Jeffery Frieden:

We’re not proposing a lot of inflation — just enough to reduce the debt burden to more manageable levels, which probably means in the 4 to 6 percent range for several years. The Fed could accomplish this by adopting a flexible inflation target, one pegged to the rate of unemployment. Chicago Fed President Charles Evans has proposed something very similar, a policy that would keep the Fed funds rate near zero and supplemented with other quantitative measures as long as unemployment remained above 7 percent or inflation stayed below 3 percent. Making the unemployment target explicit would also serve to constrain inflationary expectations: As the unemployment rate fell, the inflation target would fall with it.

Dette er vel det 74 subtile hintet til Ben Bernanke jeg har lest i artikkelform idag.

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Inflasjon eller ikke inflasjon, det er spørsmålet.

bankofengland
Vart du skræmt no?

Bildet over er tatt fra hjemmesiden til Bank of England, og hadde du, som makroøkonom, akkurat stått opp fra hiet ditt så hadde du fått hjerteinfarkt.

Det hender, noen ganger, at to ortogonale artikler kommer inn i RSS leseren, nesten rett etter hverandre, og du kan ikke unnlate å legge merke til kontrasten. La meg forklare. Først denne:

Bruce Bartlett: Can the Fed Stimulate Growth or Only Inflation? – NYTimes.com

In an editorial on Feb. 29, 2008, The Journal said it was certain that higher inflation was on the way, calling it the “Bernanke reinflation.” An editorial on June 9, 2008, warned that easy money and Keynesian stimulus “is taking us down the road to stagflation.” On Feb. 6, 2009, the Journal editorial writer George Melloan said the inevitable result of economic stimulus would be inflation. On June 10, 2009, the economist Arthur Laffer wrote on the Journal editorial page that the increase in the Fed’s monetary base was “a surefire recipe for inflation and higher interest rates.”

Echoing the party line, Representative Paul Ryan of Wisconsin, in a New York Times op-ed article on Feb. 14, 2009, said it was a virtual certainty that 1970s-style stagflation was coming back. In The New York Times on May 4, 2009, the conservative economist Allan Meltzer wrote that enormous budget deficits, rapid growth in the money supply and a sustained currency devaluation were “harbingers of inflation.”

More than two years later, none of those predictions has come to pass. According to the Federal Reserve Bank of Cleveland, inflationary expectations have been falling for years and continue to fall. Indeed, recent reports from Reuters and CNNMoney found that deflation – falling prices – is a growing problem.
[…]

Så denne:

Fed’s Plosser: Wrong to Allow Inflation to Rise to Cut Unemployment – Real Time Economics – WSJ
A key Federal Reserve official struck back Tuesday against other central bankers willing to tolerate a higher inflation rate as the result of policies that would bring down the unemployment rate, and said improved economic prospects argue against further stimulus.

Federal Reserve Bank of Philadelphia President Charles Plosser argued strongly that any move to allow inflation to accelerate, regardless of the motivation, is wrong-headed and could result in a repeat of the 1970s stagflation era of high unemployment and high prices. As he has in the past, the voting member of the interest rate-setting Federal Open Market Committee used remarks given in Philadelphia to argue that the central bank should concentrate on making monetary policy with price stability alone in mind, given that is the economic variable the Fed has the most power to control.
[..]

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Are you ready for some football? Ops, mente inflasjonsnøtt. (#nerdete)

Ta en titt på denne:
Screen shot 2011 10 13 at 17 30 38
Denne er tatt fra Økonomiske Analyser fra SSB, og den inneholder inflasjonsprognoser fra SSB og Norges Bank.
De to første kolonnene er prognoser fra 2012, fra SSB og Norges Bank respektivt. De to radene er inflasjon. Den første raden viser Konsumprisindeksen (KPI), og den andre raden er KIP-JAE (Justert for avgifter og energipriser).

Det som slår meg litt er avvikene fra de to prognosene, SSB sier KPI i 2012 skal bli 0,9% mens Norges Bank mener 1,75. Dette slo meg som ett stort avvik mens jeg skrev dette, og siden har dette avviket gnaget seg inn i underbevistheten. KIP-JAE har ett avvik på 0,9%-poeng.

For 2013 er avvikene mellom SSB og Norges Bank 0,9%-poeng for begge målene, og Norges Bank er tilbake til inflasjonsmålet 2,5% allerede i 2013. SSB er litt mindre optimistisk.

Sjeføkonom i Terra, Jan Andressen, tenker outside the box:

– Jeg savner en analyse hvor det tas utgangspunkt i fallende priser i 2012, og hvilke implikasjoner det får for økonomien og rentesettelsen, sier Andreassen.

Ikke bare fallende inflasjon, disinflasjon, men fallende priser. Deflasjon.
Screen shot 2011 10 13 at 17 29 33
Andressen vil ser scenarioer hvor den stiplede linjen havner under 0. Dette er ikke utenkelig, og inngår ikke i SBB eller NB analyser. Regner med de har internanalyser hvor worst-case analyser inneholder deflasjon.

Så, nøtten er hvorfor inflasjonsavvikene er relativt store? NB på 1,75%, SSB på 0,9% og Andressen på negativ %.

(Utgangspunktet mitt er en AS-AD med friksjoner og positiv AD. Spørsmålet er hva jeg skal legge på, hvilke friksjoner og i hvilken grad?)

Er du en nøtteknekker?

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John Cochrane utgreier om forholdet mellom gjeld og inflasjon. En kobling mange finner svak.

20110920 Cochrane4VERYSMALL
I den siste utgaven av National Affairs har John Cochrane staket ut sin intensjon i tittelen av artikkelen Inflation and Debt
. I grafen over viser Cochrane forholdet mellom NBNP og pengemengden (M1, M2) de siste 21 årene. Det er vanskelig å se noen sterk korrelasjon og dette er utgangspunktet til at gjeld burde få mer oppmerksomhet i diskusjonen om fremtidig inflasjon enn hittil. John:

[…] As a result of the federal government’s enormous debt and deficits, substantial inflation could break out in America in the next few years. If people become convinced that our government will end up printing money to cover intractable deficits, they will see inflation in the future and so will try to get rid of dollars today — driving up the prices of goods, services, and eventually wages across the entire economy. This would amount to a «run» on the dollar. As with a bank run, we would not be able to tell ahead of time when such an event would occur. But our economy will be primed for it as long as our fiscal trajectory is unsustainable.

Needless to say, such a run would unleash financial chaos and renewed recession. It would yield stagflation, not the inflation-fueled boomlet that some economists hope for. And there would be essentially nothing the Federal Reserve could do to stop it.

Disse to paragrafene er basert på antakelsen om «If people become convinced that our government will end up printing money to cover intractable deficits…» Mer presist så trykker sentralbanken penger, men det er detaljer i alt dette. Han fortsetter:

The key reason serious inflation often accompanies serious economic difficulties is straightforward: Inflation is a form of sovereign default. Paying off bonds with currency that is worth half as much as it used to be is like defaulting on half of the debt. And sovereign default happens not in boom times but when economies and governments are in trouble.

Most analysts today — even those who do worry about inflation — ignore the direct link between debt, looming deficits, and inflation. «Monetarists» focus on the ties between inflation and money, and therefore worry that the Fed’s recent massive increases in the money supply will unleash similarly massive inflation. The views of the Fed itself are largely «Keynesian,» focusing on interest rates and the aforementioned «slack» as the drivers of inflation or deflation. The Fed’s inflation «hawks» worry that the central bank will keep interest rates too low for too long and that, once inflation breaks out, it will be hard to tame. Fed «doves,» meanwhile, think that the central bank can and will raise rates quickly enough should inflation occur, so that no one need worry about inflation now.

Deretter tar han Keynesianere og Monetarister til dags, begge har nedprioritert underskudd og gjeld som kilder (viktige sådan) til inflasjonsbekymringer:

The Federal Reserve, and most academic economists who opine on policy, have an essentially Keynesian mindset. In this view, the Fed manages monetary policy by changing overnight interbank interest rates. These rates affect long-term interest rates, and then mortgage, loan, and other rates faced by consumers and business borrowers. Lower interest rates drive higher «demand,» and higher demand reduces «slack» in markets. Eventually these «tighter» markets put upward pressure on prices and wages, increasing inflation. Higher rates have the opposite effect.
[…]
The Fed describes its recent «unconventional» policy moves using this same general framework. For example, the recent «quantitative easing» in which the Fed bought long-term bonds was described as an alternative way to bring down long-term interest rates, given that short-term rates could not go down further.

One serious problem with this view is that the correlation between unemployment (or other measures of economic «slack») and inflation is actually very weak. The charts below show inflation and unemployment in the United States over the past several decades. If «slack» and «tightness» drove inflation, we would see a clear, negatively sloped line: Higher inflation would correspond to lower unemployment, and vice versa. But the charts show almost no relation between inflation and unemployment. From 1992 to 2001, inflation and unemployment declined simultaneously. More alarming, from 1973 to 1975, and again from 1978 to 1981, inflation rose dramatically despite high and rising levels of unemployment and other measures of «slack.»

Måten å forklare denne korrelasjonen mellom ledighet og inflasjon bedre er å introdusere forventninger (noe jeg har gjort på en tavle ca. 200 ganger og ca 200 ganger hørt «hva er den lille e’n for?») Det finnes problemer med dette også:

To Bernanke, costs, slack, and expectations drive inflation — and not the money supply, or the national debt. In this view, monitoring the «stability» of long-term expectations is vital, as is making sure that expectations stay «anchored.» We do not want people to respond to little blips of inflation with a fear that long-term inflation is about to break out.

So how does the Fed know whether expectations are stable? The central bank’s more extensive reports mirror the logic of the quote above: They point to surveys, forecasts, and low long-term interest rates. But the trouble is that surveys, forecasts, and long-term interest rates did not anticipate the inflation of the 1970s. For example, the chart below plots the interest rate on ten-year Treasury notes and the inflation rate over the past four decades. If long-term interest rates offered reliable warnings of inflation, we would see the interest rates rise before increases in inflation. That does not happen. Apparently «anchors» can get unstuck quickly, and inflation can surprise the bond market as well as the Fed.

Inflasjonsforventninger kan se robuste ut på papiret, men det skal ikke mye til, ifølge Cochrane, før ankeret ryker:

Major explosions of inflation around the world have ultimately resulted from fiscal problems, and it is hard to think of a fiscally sound country that has ever experienced a major inflation. So long as the government’s fiscal house is in order, people will naturally assume that the central bank should be able to stop a small uptick in inflation. Conversely, when the government’s finances are in disarray, expectations can become «unanchored» very quickly. But this link between fiscal and monetary expectations is too often unacknowledged in our conventional inflation debates — and it’s not only the Keynesians who ignore it.

Hva med Monetaristene:

While I also worry about inflation, I do not think that the money supply is the source of the danger. In fact, the correlation between inflation and the money stock is weak, at best. The chart below plots the two most common money-supply measures since 1990, along with changes in nominal gross domestic product. (M1 consists of cash, bank reserves, and checking accounts. M2 includes savings accounts and money-market accounts. Nominal GDP is output at current prices, which therefore includes inflation.) As the chart shows, money-stock measures are not well correlated with nominal GDP; they do not forecast changes in inflation, either. The correlation is no better than the one between unemployment and inflation.

Grafen han sikter til er den jeg har øverst i denne posten. Hvis du nå er nysgjerrig på hvilke kanaler underskudd og gjeld påvirker inflasjon må du lese i artikkelen. For mye og komplisert til å brytes opp i sitater her. La meg bare sitere deloverskriftene: FISCAL INFLATION, INFLATION AND INTEREST RATES, A RUN ON THE DOLLAR, THE IMPOTENT CENTRAL BANK og AVOIDING THE CRISIS. fra det siste delkapittelet:

We stand at the brink of disaster. Today, we face the possibility of a debt crisis, with the consequent financial chaos and inflation, that the Fed cannot control. In order to address this danger, we have to focus on its true nature and causes. The current inflation debate, focused on tinkering with interest rates and Fed announcements, completely misses the mark. Our desire to avoid a dangerous inflation should point us in the same direction as just about every other economic indicator and concern: It should point us toward finally bringing our deficits and debt under control and spurring long-term growth.

Hans løsning på dette, i et nøtteskall, er derfor rettet mot statsfinansene:

Our largest long-term spending problem is uncontrolled entitlements. Our entitlement programs require fundamental structural reforms.

Over decades, growth comes only from more people and more productivity — more output per person. Productivity growth fundamentally comes from new ideas and their implementation in new products, businesses, and processes.
Our tax rates are too high and revenues are too low. We should aim for a system that does roughly the opposite — raising the necessary tax revenue with the lowest possible tax rates, especially in those areas in which high rates create disincentives to work, save, invest, and contribute to economic growth.

Regulatory and legal roadblocks can be even more damaging to growth than high tax rates, tax expenditures, and spending. The uncertain threat of a visit from the Environmental Protection Agency, National Labor Relations Board, Equal Employment Opportunity Commission, Securities and Exchange Commission, or the new Consumer Financial Protection Bureau can be a greater disincentive to hiring people and investing in a business than a simple and calculable tax.

Av disse tre, starter det sterkt og slutter svakt.

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Om inflasjon i juli. Og dette er viktig.

I Norge har vi et inflasjonsmål på 2,5%. Så hvordan vi måler inflasjon, og hvilke typer inflasjon vi setter renta etter er viktig. I USA spiller inflasjon en meget viktig rolle i både finanspolitikk og pengepolitikk (eller fraværet av). Her er noen viktige poeng fra Calculated Risk:

Key Measures of Inflation in July: «Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July on a seasonally adjusted basis … The gasoline index rebounded from previous declines and rose sharply in July, accounting for about half of the seasonally adjusted increase in the all items index. … The index for all items less food and energy increased as well, though the 0.2 percent increase was slightly smaller than the two previous months.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.9% annualized rate) in July. The 16% trimmed-mean Consumer Price Index increased 0.3% (3.3% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Over the last 12 months, the median CPI rose 1.8%, the trimmed-mean CPI rose 2.1%, the CPI rose 3.6%, and the CPI less food and energy rose 1.8%.

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation. You can see the median CPI details for July here.


On a year-over-year basis, these measures of inflation are increasing, and near the Fed’s target.

On a monthly basis, the median Consumer Price Index increased 2.9% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 3.3% annualized in July, and core CPI increased 2.7% annualized.

With the slack in the system – and falling gasoline prices, the year-over-year measures will probably stay near or be below 2% by the end of this year.

Earlier:
• Philly Fed Survey:
«Regional manufacturing activity has dipped significantly»
Existing Home Sales in July: 4.67 million SAAR, 9.4 months of supply
Existing Home Sales: Comments and NSA Graph
Existing Home Sales graphs

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Inflasjon, budsjetter og rente i UK. Hva gjør du nå Mervyn King?

CPI Jeg har lenge hatt lyst til å skrive mer om inflasjon og finanspolitikk, spesielt om situasjonen i Storbritannia. Grunnen til dette er de siste dagers hendelser.

  1. I den siste målingen kunne Office for National Statistics melde en økning i konsumprisindeksen, fra 4,0% i januar til 4,4% februar (årlig justert). Jeg minner om at Storbritannia, som Norge, styrer etter et inflajsonsmål, hvor britene skal holde prisene til 2,0% økning i året.
    Hva driver disse prisene:
    Screen shot 2011 03 23 at 17 18 07
    Du kan selv lese fra tabellen over, men jeg velger å la Bank of England ha et ord med i laget:

    Around one-third of that increase had reflected an increased contribution from petrol and diesel prices. The remainder of the increase had been spread across a broad range of goods and services and seemed likely to reflect primarily the increase in the standard rate of VAT to 20% at the beginning of the year. The degree to which businesses would ultimately pass through the increase in VAT to consumer prices was surrounded by considerable uncertainty. But it was likely that the Committee would learn more about the degree of pass-through over the coming months.

    Det er usikkert hvor mye av økningen i moms har slått ut i priser ennå, men hvis de ikke har slått fullt ut er det urimelig å tro at prisene ikke vil øke.

  2. Bank of England hadde rentemøte 9 og 10 mars, og beslutningen ble å holde renten rolig på 0,5%. Kommiteen har 9 medlemmer, 6 stemte for uendret rente, 3 stemte mot. (Andrew Sentance ville øke til 1%, Spencer Dale og Matin Weale ville øke til 0,75%)
    Her er en viktig paragraf fra referatet etter rentemøtet offentligjort 23. mars.:

    The near-term outlook for inflation had deteriorated further, with a material chance that inflation would exceed 5% later this year. This added to the risk of the perception arising that the Committee was more prepared to tolerate persistent deviations of inflation from the target than in the past. If that perception took hold, in the absence of an offsetting policy response, inflation would be more likely to remain above the target in the medium term. In the view of these members, it remained most likely that the weakness of growth around the turn of the year would prove temporary, although their views differed as to the likely strength of the recovery thereafter.

    Det er altså klart at et rent inflasjonsmål er ikke lenger styrepinnen (hvis det noen gang var det), men andre deler av økonomien tillegges større vekt nå enn tidligere, og vekten på produksjonsaktiviteten har økt merkbart. For dere som kan deres tapsfunksjoner,
    Screen shot 2011 03 23 at 17 32 06tillegges λ mye større vekt enn tidligere, hvis sentralbanken er villig til å leve med 4,4 – 2 = 2,4% enheter høyere inflasjon enn målet.

  3. Storbritannias finansminister legger fram regjeringens budsjett i idag (23. mars) og det er ventet at George Osbourne følger fjorårets signaler og legger fram ett noe kontraktivt budsjett.
    • »UK government will have to borrow more than expected», fordi veksten i Storbritannia er lavere enn forventet.
    • »…because the government’s plan to instigate GBP111 billion of fiscal tightening by 2015», over 1 billion kroner (ett norskt statsbudsjett) skal den konservative regjernigen kutte innen 2015, og derfor »he would not have to inflict further pain on squeezed British households.»
    • »…closing loopholes in capital gains tax, stamp duty and the value-added tax–specifically in terms of VAT-exempt retailers based in the Channel Islands.» Dette skal hente inn rundt 40 milliarder kroner.
    • Finansministeren vil lette på det høye oljepristrykket. »Osborne cut fuel duty by a penny a liter, canceled future annual one-penny rises and delayed a further inflationary rise in fuel duty to next year.»

Standard makroøkonomisk teori sier at hvis det fremleggges et kontraktivt budsjett (og forventningene til fremtidig kontraktive budsjett eksisterer), så skal dette redusere etterspørselen etter penger, og dermed sette et press nedover på renten. Forventningene om 1000 milliarder kroner i kutt innen 2015, legger nok også press nedover. Det er derfor 4,4% inflasjon er bekymringsfullt.

Rent budsjettmessig var dette ett budsjett som forenklet skattekoden, reduserte ‘corporate taxes’ med mer enn forventet (ned til 23%, 24% var varslet), og inkluderte spesifikke krisepakker til unge arbeidssøkende i UK.
Det var også ett budsjett som nedjusterte veksten i 2011 til 1,7% (fra 2,1%) og 2,5% (fra 2,6%) i 2012. (Sverige kunne melde om 7,7% vekst i 2010).

Det går tungt i Storbritannia, og hvis ikke det private biter på kroken, vil det gå tungt lenge.

I dagene fremover får vi kanskje et klarere bilde av hvordan markedene reagerer og hvordan pundet reagerer. Mer følger, men spørsmålet er:

Hva gjør du nå Mervyn King?

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Inflasjon | Mr. Hamilton med mye fint om inflasjon, for dere inflasjonsmålentusiaster der ute.

James Hamilton, borte ved Econbrowser, har mye fint om inflasjon, og lurer på hvor inflasjonspresset befinner seg. Take it away:

Econbrowser: New indications of inflation: «New indications of inflation

Where are the inflationary pressures?

The BLS reported on Thursday that the inflation rate as measured by the headline CPI has been 1.6% over the last year. Excluding food and energy, the inflation rate would be 1.0%.
NewImage

Annual inflation rate as measured by headline CPI (blue) and core CPI (red), 2003:M1-2011:M1. Source: FRED.

The MIT Billion Prices Project is recording a slightly higher inflation rate for the U.S. of about 2.5%. As Paul Krugman explains, the discrepancy between the indexes arises from the fact that the BPP excludes the cost of services, which have been experiencing more modest price increases than goods. The Wall Street Journal has more on the different inflation rates for goods and services.
NewImage

U.S. annual inflation rate as estimated by Billion Prices Project.

The BLS CPI does register a modest tick up from recent values. If the increase in the CPI for the months of December and January alone were to be repeated for the next year, we’d be looking at annual inflation rate of 5% for the headline CPI and 1.4% for core CPI. Should we be concerned that this is the first move toward a higher inflation environment?

The biggest factor in most firms’ costs is their wage bill. The unemployment rate is still at an extremely high 9%, and I don’t expect it to come down quickly. We’re also seeing solid gains in productivity. In those circumstances, telling a story of inflation driven by wage costs seems more than a little far-fetched.

There’s also much discussion of inflation pressures arising from all the money that the Federal Reserve is supposedly printing. But as noted here last week, currency in circulation has actually been growing at a 5.2% rate over the last two years, which is lower than the historical average, and, given real output growth in excess of 3%, is consistent with the very low rates of inflation confirmed in the latest observed annual inflation rates.

The main source of inflationary pressure today is coming from outside the United States. There are two factors in this. First, real economic growth at the moment is much stronger in emerging markets than here. Second, countries such as China have kept their exchange rates artificially low relative to the dollar.

Macroblog has a nice discussion of this issue. If a country tries to keep its nominal exchange rate from appreciating by using monetary policy to buy up foreign reserves, the predicted outcome is inflation in their own country.

NewImage
Source: Macroblog.

If the nominal exchange rate is prevented from doing the adjusting, the real exchange rate must.

NewImage
Source: Economist.

For these reasons, I see the principal inflationary pressures in the U.S. at the moment coming from the prices of internationally traded commodities and imported goods. Given the huge volume of U.S. imports from China, I think the impact from the latter channel could be noticeable.»

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Krugman – En påminnelse på at inflasjon ikke er inflasjon.

Paul Krugman minner oss på at inflasjon ikke er inflasjon.

A Hawk for All Seasons – NYTimes.com: «A Hawk for All Seasons»
ezinflation.jpg
Eurostat
My old teacher Charles Kindleberger once wrote that the existence of multiple measures of the balance of payments had one great virtue: they allowed observers, by picking and choosing, to be always optimistic or always pessimistic, depending on temperament.

The same thing is happening now with inflation measures. In particular, by switching back and forth between core and headline inflation, you can manage to find reasons to fear inflation, no matter what.

Which brings me to Jean-Claude Trichet’s latest warnings about inflation. As the chart above (of 12-month changes) shows, eurozone inflation has behaved a lot like US inflation: low and falling core inflation in the face of a depressed economy, but big swings in headline inflation around that trend with fluctuations in commodity prices. But Trichet now says that the headline number is the one to watch.

Those of us whose memories stretch back more than a few months can only say, hmmmm.

First of all, if headline inflation is The One, why wasn’t the ECB all worked up about below-target inflation in 2009? Funny, I don’t recall a lot of speeches about the need for monetary loosening. Why, it’s almost as if the ECB switches between inflation measures to pick whichever one currently makes the case for tight money (a point Willem Buiter made a while back).

Second, the ECB made exactly the same argument back in 2008, and raised interest rates even as the world was sliding into financial crisis. One might have expected Trichet to be a bit humbled by that experience. But I guess not.

The ECB probably won’t tighten just yet. But it’s clearly gearing up to do the wrong thing as soon as possible.»

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